Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Option Contracts Overlying 10 Shares of a Security, 39535-39537 [2012-16221]
Download as PDF
<![CDATA[
Federal Register / Vol. 77, No. 128 / Tuesday, July 3, 2012 / Notices
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BYX–
2012–011 and should be submitted on
or before July 24, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–16214 Filed 7–2–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67283; File No. SR–
NYSEArca–2012–64]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To List and Trade Option
Contracts Overlying 10 Shares of a
Security
June 27, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on June 15,
2012, NYSE Arca, Inc. (‘‘Exchange’’ or
‘‘NYSE Arca’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade option contracts overlying 10
shares of a security (‘‘mini-options
contracts’’). The text of the proposed
rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to list and
trade mini-options contracts and
implement rule text necessary to
integrate mini-options contracts with
contracts overlying 100 shares
(‘‘standard contracts’’). Whereas
standard contracts represent a
deliverable of 100 shares of an
underlying security, mini-options
contracts would represent a deliverable
of 10 shares. The Exchange proposes to
initially list and trade mini-options
contracts overlying 5 high priced
securities for which the standard
contract overlying the same security
exhibits significant liquidity.3 The
Exchange believes that investors would
benefit from the availability of minioptions contracts by making options
overlying high priced securities more
readily available as an investing tool
and at more affordable and realistic
prices, most notably for the average
retail investor.
For example, with Apple Inc.
(‘‘AAPL’’) trading at $605.85 on March
21, 2012, ($60,585 for 100 shares
underlying a standard contract), the 605
level call expiring on March 23 is
trading at $7.65. The cost of the
standard contract overlying 100 shares
would be $765, which is substantially
higher in notional terms than the
average equity option price of $250.89.4
Proportionately equivalent mini-options
contracts on AAPL would provide
investors with the ability to manage and
hedge their portfolio risk on their
underlying investment, at a price of
$76.50 per contract. In addition,
investors who hold a position in AAPL
at less than the round lot size would
still be able to avail themselves of
options to manage their portfolio risk.
For example, the holder of 50 shares of
AAPL could write covered calls for five
mini-options contracts. The table below
demonstrates the proposed differences
between a mini-options contracts [sic]
and a standard contract with a strike
price of $125 per share and a bid or offer
of $3.20 per share:
Standard
Share Deliverable Upon Exercise .....................................................................................................................
Strike Price ........................................................................................................................................................
Bid/Offer .............................................................................................................................................................
Premium Multiplier .............................................................................................................................................
Total Value of Deliverable ..........................................................................................................................
Total Value of Contract ..............................................................................................................................
srobinson on DSK4SPTVN1PROD with NOTICES
The Exchange notes that the
Commission has approved an earlier
proposal of NYSE Arca to list and trade
option contracts overlying a number of
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Exchange proposes that mini-options
contracts would be listed in only five issues,
specifically SPDR S&P 500 (SPY), Apple, Inc.
(AAPL), SPDR Gold Trust (GLD), Google Inc.
(GOOG), and Amazon.com Inc. (AMZN). These
issues were selected because they are priced greater
1 15
VerDate Mar<15>2010
16:27 Jul 02, 2012
Jkt 226001
39535
100 shares .......
125 ...................
3.20 ..................
$100 .................
$12,500 ............
$320 .................
Mini
10 shares.
125.
3.20.
$10.
$1,250.
$32.
shares other than 100.5 Moreover, the
concept of listing and trading parallel
options products of reduced values and
sizes on the same underlying security is
not novel. For example, parallel product
pairs on a full-value and reduced-value
basis are currently listed on the S&P 500
Index (‘‘SPX’’ and ‘‘XSP,’’ respectively),
than $100 and are among the most actively traded
issues, in that the standard contract exhibits average
daily volume (‘‘ADV’’) over the previous three
calendar months of at least 45,000 contracts,
excluding LEAPS and FLEX series. The Exchange
notes that any expansion of the program would
require that a subsequent proposed rule change be
submitted with the Commission.
4 A high priced underlying security may have
relatively expensive options, because a low
percentage move in the share price may mean a
large movement in the options in terms of absolute
dollars. Average non-FLEX equity option premium
per contract January 1–December 31, 2011. See
https://www.theocc.com/webapps/monthly-volumereports?reportClass=equity.
5 See Securities Exchange Act Release No. 44025
(February 28, 2001), 66 FR 13986 (March 8, 2001)
(approving SR–PCX–01–12).
PO 00000
Frm 00073
Fmt 4703
Sfmt 4703
E:\FR\FM\03JYN1.SGM
03JYN1
srobinson on DSK4SPTVN1PROD with NOTICES
39536
Federal Register / Vol. 77, No. 128 / Tuesday, July 3, 2012 / Notices
the Nasdaq 100 Index (‘‘NDX’’ and
‘‘MNX,’’ respectively) and the Russell
2000 Index (‘‘RUT’’ and ‘‘RMN,’’
respectively).
The Exchange believes that the
proposal to list and trade mini-options
contracts will not lead to investor
confusion. There are two important
distinctions between mini options and
standard options that are designed to
ease the likelihood of any investor
confusion. First, the premium multiplier
for the proposed mini options will be
10, rather than 100, to reflect the smaller
unit of trading. To reflect this change,
the Exchange proposes to add Rule
6.71(c) which notes that bids and offers
for an option contract overlying 10
shares will be expressed in terms of
dollars per 1/10th part of the total value
of the contract. Thus, an offer of ‘‘.50’’
shall represent an offer $5.00 on an
options contract having a unit of trading
consisting of 10 shares. Additionally,
the Exchange will designate minioptions contracts with different trading
symbols than their related standard
contract.6 The Exchange believes that
the clarity of this approach is
appropriate and transparent, as
supported by the recent Options
Clearing Corporation (‘‘OCC’’) filing to
amend its bylaws to accommodate such
strike prices and premiums.7 Moreover,
the Exchange believes that the terms of
mini-options contracts are consistent
with the terms of the Options Disclosure
Document.
The Exchange recognizes the need to
differentiate mini-options contracts
from standard options and therefore is
proposing the following changes to its
rules.
The Exchange proposes to add
Commentary .01 to Rule 6.3 (Option
Contracts to Be Traded) to reflect that,
in addition to option contracts with a
unit of trading of 100, the Exchange may
list option contracts overlying 10 shares
of SPDR S&P 500 (SPY), Apple, Inc.
(AAPL), SPDR Gold Trust (GLD), Google
Inc. (GOOG), and Amazon.com Inc.
(AMZN) for all expirations applicable to
100 share options in each class. The
Exchange believes that these five
securities are appropriate because they
are high priced securities for which
there is already significant options
liquidity and therefore significant
customer demand.
The Exchange also proposes to add
Commentary .14 to Rule 6.4 (Series of
6 OCC Symbology is structured for contracts with
other than 100 shares to be designated with a
numerical suffix to the standard trading symbol,
i.e., AAPL8.
7 See Securities Exchange Act Release No. 61485
(February 3, 2010), 75 FR 6750 (February 10, 2010)
(SR–OCC–2010–01).
VerDate Mar<15>2010
16:27 Jul 02, 2012
Jkt 226001
Options Open for Trading) to list series
of mini-options provided that the
underlying security has been designated
as eligible under Rule 6.3 Commentary
.01. Also, the Exchange proposes to not
permit the listing of additional minioptions series if the underlying is
trading at $90 or less to limit the
number of strikes once the underlying is
no longer a high priced security. The
Exchange proposes a $90.01 minimum
for continued qualification so that
additional mini-options strikes may be
added even though the underlying has
fallen slightly below the initial
qualification standard. In addition, the
underlying security must be trading
above $90 for five consecutive days
before the listing of mini-option
contracts in a new expiration month.
This restriction will allow the Exchange
to list mini-option strikes without
disruption when a new expiration
month is added even if the underlying
has had a minor decline in price.
The Exchange also proposes to add
Commentary .08 to Rule 6.8 (Position
Limits) to reflect that, for purposes of
compliance with the Position Limits of
Rules [sic] 6.8, ten mini-options
contracts will equal one standard
contract overlying 100 shares.
The Exchange also proposes to add
subsection (c) to Rule 6.71 (Meaning of
Premium Bids and Offers) to extend the
explanation of bids and offers with
respect to mini-options contracts and
also remove references to ExchangeTraded Fund Shares, because other
types of underlying securities have
options traded on them.
With regard to the impact of this
proposal on system capacity, the
Exchange has analyzed its capacity and
represents that it and the Options Price
Reporting Authority have the necessary
systems capacity to handle the potential
additional traffic associated with the
listing and trading of mini-options
contracts. The Exchange has further
discussed the proposed listing and
trading of mini-options contracts with
the OCC, which has represented that it
is able to accommodate the proposal.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with Section
6(b) 8 of the Securities Exchange Act of
1934 (the ‘‘Act’’), in general, and
furthers the objectives of Section
6(b)(5),9 in particular, because it is
designed to promote just and equitable
principles of trade, to prevent
fraudulent and manipulative acts, to
remove impediments to and to perfect
PO 00000
8 15
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00074
Fmt 4703
the mechanism for a free and open
market and a national market system
and, in general, to protect investors and
the public interest. Specifically, the
Exchange believes that investors would
benefit from the availability of minioptions contracts by making options on
high priced securities more readily
available as an investing tool and at
more affordable and realistic prices,
most notably for the average retail
investor. As described above, the
proposal contains a number of features
designed to protect investors by
reducing investor confusion, such as the
mini-options contracts being designated
by different trading symbols from their
related standard contracts.10 Moreover,
the proposal is designed to protect
investors and the public interest by
providing investors with an enhanced
tool to reduce risk in high priced
securities. In particular, the proposed
contracts will provide retail customers
who invest in high priced issues in lots
of less than 100 shares with a means of
protecting their investments that is
presently only available to those who
have positions of 100 shares or more.
Further, the proposal currently is
limited to five high priced securities for
which there is already significant
options liquidity, and therefore
significant customer demand and
trading volume.
B.Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
such proposed rule change, or
10 See
Sfmt 4703
E:\FR\FM\03JYN1.SGM
supra note 6.
03JYN1
Federal Register / Vol. 77, No. 128 / Tuesday, July 3, 2012 / Notices
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2012–64 on the
subject line.
Paper Comments
srobinson on DSK4SPTVN1PROD with NOTICES
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2012–64. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2012–64 and should be
submitted on or before July 24, 2012.
VerDate Mar<15>2010
16:27 Jul 02, 2012
Jkt 226001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–16221 Filed 7–2–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67271; File No. SR–Phlx–
2012–85]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify Its
Excess Order Fee
June 27, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 25,
2012, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
Phlx proposes to institute an Excess
Order Fee. [sic] Phlx will implement the
proposed change on July 2, 2012. The
text of the proposed rule change is
available at https://
nasdaqomxphlx.cchwallstreet.com/
nasdaqomxphlx/phlx/, at Phlx’s
principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item III below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
PO 00000
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
Frm 00075
Fmt 4703
Sfmt 4703
39537
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Phlx recently submitted a proposed
rule change to introduce an Excess
Order Fee,3 aimed at reducing
inefficient order entry practices of
certain market participants that place
excessive burdens on Phlx’s NASDAQ
OMX PSX system (‘‘PSX’’) and the
member organizations that trade on it
and that may negatively impact the
usefulness and life cycle cost of market
data. The fee is scheduled to be
implemented on July 2, 2012. In general,
the determination of whether to impose
the fee on a particular market
participant identifier (‘‘MPID’’) is made
by calculating the ratio between (i)
entered orders, weighted by the distance
of the order from the national best bid
or offer (‘‘NBBO’’), and (ii) orders that
execute in whole or in part. The fee is
imposed on MPIDs that have an ‘‘Order
Entry Ratio’’ of more than 100.
Through this proposed rule change,
the Exchange is modifying the
parameters of the fee slightly to provide
that all calculations under the rule
establishing the fee will be based on
orders received by PSX during regular
market hours (generally, 9:30 a.m. to
4:00 p.m.) 4 and will exclude orders
received at other times, even if they
execute during regular market hours.
Phlx is making the change because the
concerns about inefficient order entry
practices that have prompted the fee are
generally not present with regard to
trading activity outside of regular
market hours, when volumes are light.
Phlx is also concerned that lower
execution rates outside of regular
market hours may skew calculations
under the rule, such that an MPID that
is considered acceptably efficient during
regular market hours would be required
to pay a fee under the rule due to its
activity outside of regular market hours.
2. Statutory Basis
Phlx believes that the proposed rule
change is consistent with the provisions
of Section 6 of the Act,5 in general, and
with Sections 6(b)(4) and 6(b)(5) of the
Act,6 in particular, in that it provides for
the equitable allocation of reasonable
3 Securities Exchange Act Release No. 67004 (May
17, 2012), 77 FR 30581 (May 23, 2012) (SR–Phlx–
2012–64).
4 Regular market hours may be different in some
circumstances, such as on the day after
Thanksgiving, when regular market hours on all
exchanges traditionally end at 1:00 p.m.
5 15 U.S.C. 78f.
6 15 U.S.C. 78f(b)(4) and (5).
E:\FR\FM\03JYN1.SGM
03JYN1
]]>Agencies
[Federal Register Volume 77, Number 128 (Tuesday, July 3, 2012)]
[Notices]
[Pages 39535-39537]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16221]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67283; File No. SR-NYSEArca-2012-64]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade Option Contracts Overlying 10
Shares of a Security
June 27, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on June 15, 2012, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the self-regulatory organization. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade option contracts overlying
10 shares of a security (``mini-options contracts''). The text of the
proposed rule change is available on the Exchange's Web site at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to list and trade mini-options contracts
and implement rule text necessary to integrate mini-options contracts
with contracts overlying 100 shares (``standard contracts''). Whereas
standard contracts represent a deliverable of 100 shares of an
underlying security, mini-options contracts would represent a
deliverable of 10 shares. The Exchange proposes to initially list and
trade mini-options contracts overlying 5 high priced securities for
which the standard contract overlying the same security exhibits
significant liquidity.\3\ The Exchange believes that investors would
benefit from the availability of mini-options contracts by making
options overlying high priced securities more readily available as an
investing tool and at more affordable and realistic prices, most
notably for the average retail investor.
---------------------------------------------------------------------------
\3\ The Exchange proposes that mini-options contracts would be
listed in only five issues, specifically SPDR S&P 500 (SPY), Apple,
Inc. (AAPL), SPDR Gold Trust (GLD), Google Inc. (GOOG), and
Amazon.com Inc. (AMZN). These issues were selected because they are
priced greater than $100 and are among the most actively traded
issues, in that the standard contract exhibits average daily volume
(``ADV'') over the previous three calendar months of at least 45,000
contracts, excluding LEAPS and FLEX series. The Exchange notes that
any expansion of the program would require that a subsequent
proposed rule change be submitted with the Commission.
---------------------------------------------------------------------------
For example, with Apple Inc. (``AAPL'') trading at $605.85 on March
21, 2012, ($60,585 for 100 shares underlying a standard contract), the
605 level call expiring on March 23 is trading at $7.65. The cost of
the standard contract overlying 100 shares would be $765, which is
substantially higher in notional terms than the average equity option
price of $250.89.\4\ Proportionately equivalent mini-options contracts
on AAPL would provide investors with the ability to manage and hedge
their portfolio risk on their underlying investment, at a price of
$76.50 per contract. In addition, investors who hold a position in AAPL
at less than the round lot size would still be able to avail themselves
of options to manage their portfolio risk. For example, the holder of
50 shares of AAPL could write covered calls for five mini-options
contracts. The table below demonstrates the proposed differences
between a mini-options contracts [sic] and a standard contract with a
strike price of $125 per share and a bid or offer of $3.20 per share:
---------------------------------------------------------------------------
\4\ A high priced underlying security may have relatively
expensive options, because a low percentage move in the share price
may mean a large movement in the options in terms of absolute
dollars. Average non-FLEX equity option premium per contract January
1-December 31, 2011. See https://www.theocc.com/webapps/monthly-volume-reports?reportClass=equity.
------------------------------------------------------------------------
Standard Mini
------------------------------------------------------------------------
Share Deliverable Upon 100 shares.......... 10 shares.
Exercise.
Strike Price................ 125................. 125.
Bid/Offer................... 3.20................ 3.20.
Premium Multiplier.......... $100................ $10.
Total Value of $12,500............. $1,250.
Deliverable.
Total Value of Contract. $320................ $32.
------------------------------------------------------------------------
The Exchange notes that the Commission has approved an earlier
proposal of NYSE Arca to list and trade option contracts overlying a
number of shares other than 100.\5\ Moreover, the concept of listing
and trading parallel options products of reduced values and sizes on
the same underlying security is not novel. For example, parallel
product pairs on a full-value and reduced-value basis are currently
listed on the S&P 500 Index (``SPX'' and ``XSP,'' respectively),
[[Page 39536]]
the Nasdaq 100 Index (``NDX'' and ``MNX,'' respectively) and the
Russell 2000 Index (``RUT'' and ``RMN,'' respectively).
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 44025 (February 28,
2001), 66 FR 13986 (March 8, 2001) (approving SR-PCX-01-12).
---------------------------------------------------------------------------
The Exchange believes that the proposal to list and trade mini-
options contracts will not lead to investor confusion. There are two
important distinctions between mini options and standard options that
are designed to ease the likelihood of any investor confusion. First,
the premium multiplier for the proposed mini options will be 10, rather
than 100, to reflect the smaller unit of trading. To reflect this
change, the Exchange proposes to add Rule 6.71(c) which notes that bids
and offers for an option contract overlying 10 shares will be expressed
in terms of dollars per 1/10th part of the total value of the contract.
Thus, an offer of ``.50'' shall represent an offer $5.00 on an options
contract having a unit of trading consisting of 10 shares.
Additionally, the Exchange will designate mini-options contracts with
different trading symbols than their related standard contract.\6\ The
Exchange believes that the clarity of this approach is appropriate and
transparent, as supported by the recent Options Clearing Corporation
(``OCC'') filing to amend its bylaws to accommodate such strike prices
and premiums.\7\ Moreover, the Exchange believes that the terms of
mini-options contracts are consistent with the terms of the Options
Disclosure Document.
---------------------------------------------------------------------------
\6\ OCC Symbology is structured for contracts with other than
100 shares to be designated with a numerical suffix to the standard
trading symbol, i.e., AAPL8.
\7\ See Securities Exchange Act Release No. 61485 (February 3,
2010), 75 FR 6750 (February 10, 2010) (SR-OCC-2010-01).
---------------------------------------------------------------------------
The Exchange recognizes the need to differentiate mini-options
contracts from standard options and therefore is proposing the
following changes to its rules.
The Exchange proposes to add Commentary .01 to Rule 6.3 (Option
Contracts to Be Traded) to reflect that, in addition to option
contracts with a unit of trading of 100, the Exchange may list option
contracts overlying 10 shares of SPDR S&P 500 (SPY), Apple, Inc.
(AAPL), SPDR Gold Trust (GLD), Google Inc. (GOOG), and Amazon.com Inc.
(AMZN) for all expirations applicable to 100 share options in each
class. The Exchange believes that these five securities are appropriate
because they are high priced securities for which there is already
significant options liquidity and therefore significant customer
demand.
The Exchange also proposes to add Commentary .14 to Rule 6.4
(Series of Options Open for Trading) to list series of mini-options
provided that the underlying security has been designated as eligible
under Rule 6.3 Commentary .01. Also, the Exchange proposes to not
permit the listing of additional mini-options series if the underlying
is trading at $90 or less to limit the number of strikes once the
underlying is no longer a high priced security. The Exchange proposes a
$90.01 minimum for continued qualification so that additional mini-
options strikes may be added even though the underlying has fallen
slightly below the initial qualification standard. In addition, the
underlying security must be trading above $90 for five consecutive days
before the listing of mini-option contracts in a new expiration month.
This restriction will allow the Exchange to list mini-option strikes
without disruption when a new expiration month is added even if the
underlying has had a minor decline in price.
The Exchange also proposes to add Commentary .08 to Rule 6.8
(Position Limits) to reflect that, for purposes of compliance with the
Position Limits of Rules [sic] 6.8, ten mini-options contracts will
equal one standard contract overlying 100 shares.
The Exchange also proposes to add subsection (c) to Rule 6.71
(Meaning of Premium Bids and Offers) to extend the explanation of bids
and offers with respect to mini-options contracts and also remove
references to Exchange-Traded Fund Shares, because other types of
underlying securities have options traded on them.
With regard to the impact of this proposal on system capacity, the
Exchange has analyzed its capacity and represents that it and the
Options Price Reporting Authority have the necessary systems capacity
to handle the potential additional traffic associated with the listing
and trading of mini-options contracts. The Exchange has further
discussed the proposed listing and trading of mini-options contracts
with the OCC, which has represented that it is able to accommodate the
proposal.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \8\ of the Securities Exchange Act of 1934 (the ``Act''),
in general, and furthers the objectives of Section 6(b)(5),\9\ in
particular, because it is designed to promote just and equitable
principles of trade, to prevent fraudulent and manipulative acts, to
remove impediments to and to perfect the mechanism for a free and open
market and a national market system and, in general, to protect
investors and the public interest. Specifically, the Exchange believes
that investors would benefit from the availability of mini-options
contracts by making options on high priced securities more readily
available as an investing tool and at more affordable and realistic
prices, most notably for the average retail investor. As described
above, the proposal contains a number of features designed to protect
investors by reducing investor confusion, such as the mini-options
contracts being designated by different trading symbols from their
related standard contracts.\10\ Moreover, the proposal is designed to
protect investors and the public interest by providing investors with
an enhanced tool to reduce risk in high priced securities. In
particular, the proposed contracts will provide retail customers who
invest in high priced issues in lots of less than 100 shares with a
means of protecting their investments that is presently only available
to those who have positions of 100 shares or more. Further, the
proposal currently is limited to five high priced securities for which
there is already significant options liquidity, and therefore
significant customer demand and trading volume.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ See supra note 6.
---------------------------------------------------------------------------
B.Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
[[Page 39537]]
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2012-64 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2012-64. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2012-64 and should
be submitted on or before July 24, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Kevin M. O'Neill,
Deputy Secretary.
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. 2012-16221 Filed 7-2-12; 8:45 am]
BILLING CODE 8011-01-P
